Premature Closure of 5-Year Time Deposit (TD) Accounts
Reference: Ministry of Finance, Department of Economic Affairs (Budget Division) Office Memorandum dated 16 July 2026
Subject
Clarification regarding the applicability of 2% interest deduction for premature closure of 5-year Time Deposit (TD) accounts after completion of four years.
Key Clarification
- The amendments notified through G.S.R. 830(E) dated 07.11.2023, effective from 09.11.2023, apply only to TD accounts opened on or after 09.11.2023.
- TD accounts opened before 09.11.2023 will continue to be governed by the provisions of the National Savings Time Deposit Scheme, 2019 as they existed prior to the amendment.
Interest Calculation for Premature Closure
For 5-year TD accounts opened before 09.11.2023 and closed prematurely after completion of four years:
- Interest shall be calculated at the rate applicable to the corresponding 3-year Time Deposit.
- A deduction of 2 percentage points shall be applied from that rate.
- This is in accordance with Rule 8(c) of the National Savings Time Deposit Scheme, 2019 (pre-amendment provisions).
Operational Impact
- The 2% deduction remains applicable for eligible 5-year TD accounts opened prior to 09.11.2023 and closed after four years.
- Accounts opened on or after 09.11.2023 will be governed by the amended rules notified through G.S.R. 830(E).
Conclusion
The Ministry of Finance has clarified that the pre-amendment provisions, including the 2% deduction, continue to apply to 5-year TD accounts opened before 09.11.2023, even when they are prematurely closed after four years. This clarification has been issued with the approval of the Competent Authority.
